People tell me the oil and natural gas industry’s job projections are misleading. How do they arrive at those numbers?

Answer:

The oil and natural gas industry currently supports 5.3 percent of total U.S. employment. To put this in perspective, the number of jobs supported by the upstream oil and natural gas industry segment alone in 2010—2.2 million—is larger than the populations of 15 states.

The Wood Mackenzie energy consulting firm reported in September 2011 that, with the right set of pro-energy development policies in place, the oil and natural gas industry could create 1 million new U.S. jobs by 2018. This estimate represents direct industry jobs, as well as indirect and induced ones. It’s the “indirect and induced” calculation that critics say is misleading. In reality, “induced” jobs are hardly a seldom-used category. Virtually every employment study uses induced jobs to estimate employment impacts. The Economic Policy Institute counts induced jobs, and the White House uses induced jobs calculations too. It seems including indirect/induced jobs in employment modeling only became controversial when they were applied to the oil and natural gas industry.

API Vice President of Scientific and Regulatory Affairs Kyle Isakower explained: 

“The estimated indirect and induced jobs that could be created by pro-development policies are actually quite conservative given that the multiplier used by Wood Mackenzie is significantly lower than published Bureau of Economic Analysis employment multipliers relevant to the oil and natural gas industry.”

Isakower also said:

“The full macro-economic effect of economic investment goes well beyond direct employment. Not only is this concept accepted by almost all mainstream economists, but Dr. Wassily Leontief won a Nobel Prize for developing the input-output methodology that includes this effect. In fact, most recent estimates of jobs impacts, including estimates of the administration’s recent jobs proposal, include direct, indirect and induced effects in their calculations.”

The Wood Mackenzie study’s main point is hard to refute: the right policies could create hundreds of thousands of jobs, generate billions in government revenue and put America on a much more secure energy course. With pro-development policies from Washington, our industry could create 1 million new jobs by 2018 and 1.4 million by 2030. Instead, critics quibble over what constitutes a “direct job” vs. jobs that spin off from industry activities. But the industry's job-creation number projected by Wood Mackenzie research still stands.